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A nonparametric method for valuing new goods

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Author Info
Laura Blow () (Institute for Fiscal Studies (IFS), 7 Ridgmount Street, London WC1E 7AE, United Kingdom.)
Ian Crawford () (Institute for Fiscal Studies (IFS), 7 Ridgmount Street, London WC1E 7AE, United Kingdom.)

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Abstract

This paper presents a revealed preference method for calculating a lower bound on the virtual or reservation price of a new good and suggests a way to improve these bounds by using budget expansion paths. This allows the calculation of cost-of-living and price indices when the number of goods available changes between periods. We apply this technique to the UK National Lottery and illustrate the effects of its inclusion in measures of inflation. JEL Classification: C43; D11.

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Paper provided by European Central Bank in its series Working Paper Series with number 143.

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Length: 57 pages
Date of creation: May 2002
Date of revision:
Handle: RePEc:ecb:ecbwps:20020143

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Related research
Keywords: Cost-of-living indices; new goods; GARP.;

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  2. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July. [Downloadable!] (restricted)
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    Other versions:
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    Other versions:
  5. Farrell, Lisa & Walker, Ian, 1999. "The welfare effects of lotto: evidence from the UK," Journal of Public Economics, Elsevier, vol. 72(1), pages 99-120, April. [Downloadable!] (restricted)
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